Energy Drink Competition
Essay Preview: Energy Drink Competition
Report this essay
For this assignment I was asked to read the case entitled Competition in Energy Drinks, Sports Drinks, and Vitamin-Enhanced Beverages and answer a series of questions in regards to the alternative beverage market and strategy. The case can be found in Crafting & Executing Strategy The Quest For Competitive Advantage Concepts and Cases 18th Ed written by Arthur A. Thompson, Margaret A. Peteraf, John E. Gamble, and A.J Strikland III. The contents of this paper are my interpretation of the facts and events contained within the case found on pages C75-C87 of the textbook .
What are the strategically relevant components of the global and U.S. beverage industry macro-environment? How do the economic characteristics of the alternative beverage segment of the industry differ from that of other beverage categories? Explain.
The strategically relevant components of the global and U.S. beverage industry is the fact that the companies such as Pepsi Co, and Coco Cola rely on the sales of the alternative beverages in a mature market to continue sustaining a volume of growth while sales of the carbonated beverages is decline.
The alternative beverage industry is also strategizing to expand the international market through the use of product innovation with new product lines being offered as well as increasing the flavor offerings in the vitamin enriched beverage segment. While working to increase the size of the market as well as the market share held for the alternative beverage market companies strive to increase the number of products being offered while constantly facing criticism over the health risks involved with consuming both energy drinks and calming beverages.
The alternative beverage market relies on charging premium prices for their products while in turn produces a higher profit margin. This strategy is increasingly important to the produces as the carbonated beverage market has faced consistent decline as consumers become more conscious of the food and beverages they are consuming.
What is competition like in the alternative beverage industry? Which of the five competitive forces is strongest? Which is weakest? What competitive forces seem to have the greatest effect on industry attractiveness and the potential profitability of new entrants?
The competition in the alternative beverage market can be intense as each company such as Pepsi and Coca Cola compete for not only market share but often times shelf space in smaller grocery retail locations. Each manufacturer is consistently introducing additional flavors of beverages and or additional products into the market in order to stay ahead of their competitor. Speaking on terms of the market alone, the closest competitors would be that of carbonated beverages and or fruit juices in which both have seen a decline in the market.
I would be incline to state that the strongest competitive force for the alternative beverage industry would be rivalry among competing sellers as you have two of the worlds largest beverage producers competing in the market, Pepsi and Coca Cola, as well as several other smaller companies that produce very similar beverages. Each organization has to compete for space in the retail stores as well as space in much small convenience stores. Since space is limited in convenience stores it is important that each company within the market strive to acquire as much product display space as possible, and the same goes for smaller retail grocery locations.
I believe that the weakest competitive force for the alternative beverage industry is the customers as they do not try to bargain with the suppliers for lower pricing. The alternative beverage industry provides the highest profit margin for the beverage industry over the carbonated beverage segment. Suppliers and new entrants provide the greatest effect on the industry as often times manufacturers are at the mercy of the supplier in regards to securing rare ingredients needed to make energy drinks and calming drinks. These are materials such as taurine that the manufacturer would not necessarily